In-depth Analysis of the Investment Logic Behind Zhongji Innolight's Controlling Shareholder's Share Reduction

Zhongji Innolight (300308.SZ)'s controlling shareholder, Shandong Zhongji Investment Holding Co., Ltd., reduced its holdings by 5.5 million shares through block trading from November 20, 2025 to January 15, 2026, with an average reduction price of RMB 521.73 per share, accounting for 0.49% of the company’s total share capital. After the completion of the share reduction, the shareholding ratio of the controlling shareholder decreased from 11.42% to 10.93%. Notably, the controlling shareholder also committed to

after the completion of the share reduction [1].

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From the perspective of stock performance, Zhongji Innolight’s growth in 2025 is astonishing, with a cumulative increase of

from the beginning of the year to date, a staggering increase in the past year, and an increase of over in three years [0]. Against the backdrop that the current stock price of RMB 617 has generated a floating profit of approximately compared to the average reduction price of RMB 521.73, the controlling shareholder’s choice to reduce holdings at this time is fully justified.

This operation reflects a typical investment strategy of

. As an original shareholder of the company, the controlling shareholder’s shareholding cost is usually much lower than the current market price. Choosing to partially reduce holdings when the valuation is at a historical high not only locks in investment gains but also reserves a risk buffer for possible market fluctuations in the future.

According to the announcement, the reason for the share reduction is clearly stated as

[1]. This explanation is a common and compliant reason in the equity operations of listed companies. Combined with the investment plan released by the company in the same period — it plans to subscribe for RMB 354 million worth of shares in an industrial investment fund to expand its investment layout in optical communication, data center, automotive electronics, robotics and other fields [1] — it can be reasonably inferred that the controlling shareholder’s share reduction this time is intended to:

• Raise funds for industrial investment layout
• Meet short-term cash flow needs such as year-end bonuses and red envelopes
• Achieve diversified allocation of personal assets

The most important signal in this share reduction arrangement is the

. This design has multiple strategic implications:

Signal Type	Specific Meaning
Expression of Confidence	The controlling shareholder’s voluntary lock-up commitment indicates its confidence in the company’s long-term value and does not believe that the current valuation is seriously overestimated
Stabilizing Market Expectations	Transmits a clear signal to the market that “the share reduction has ended” , avoiding panic caused by follow-up selling
Recognition of Company Value	Willing to hold shares for a long time after reducing holdings at the current price, indicating its recognition of the company’s future growth space

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Zhongji Innolight delivered an impressive performance in the first three quarters of 2025 [2]:

• Operating Revenue
  : RMB 25.005 billion, a year-on-year increase of
  44.43%
• Net Profit Attributable to Shareholders of Listed Companies
  : RMB 7.132 billion, a year-on-year increase of
  90.05%
• Third Quarter Single Quarter
  : Net profit attributable to shareholders was RMB 3.137 billion, a year-on-year increase of
  124.98%

The profit growth rate is significantly higher than the revenue growth rate, reflecting the improvement in profitability brought about by the company’s

and . The company’s gross profit margin reaches approximately , net profit margin is about , and ROE is as high as [0], all of which are at the leading level in the industry.

As a global leader in optical modules, Zhongji Innolight benefits from the industry dividend brought by the explosive demand for AI computing power:

• Global Ethernet Optical Module Market Size
  : It is expected to grow by 35% year-on-year to USD 18.9 billion in 2026, and is expected to exceed USD 35 billion in 2030 [3]
• Industry Market Share
  : Zhongji Innolight’s global market share in optical modules is firmly in the range of
  25%-30%
  , ranking firmly as the industry leader
• Product Iteration
  : 800G optical modules continue to volume ship, and 1.6T optical modules have entered the mass delivery stage. The company has seized the first-mover advantage in technological iteration

According to a research report from CICC, North American CSPs (Cloud Service Providers) continue to upwardly revise their capital expenditures [2]:

• Google revised its 2025 capital expenditure from USD 80 billion to USD 91-93 billion
• Microsoft stated that the capital expenditure growth rate for fiscal year 2026 will be higher than that for fiscal year 2025

The continuous upward revision of AI capital expenditures directly drives the procurement demand for high-speed optical modules, providing solid demand support for Zhongji Innolight’s performance growth.

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Signal Dimension	Interpretation	Confidence Level
Share Reduction Timing	Locking in gains through high-level share reduction, which is in line with the principles of value investment	High
Share Reduction Ratio	Only 0.49% reduction, with a small ratio, which has limited impact on the equity structure	High
Lock-up Commitment	Voluntary commitment not to reduce holdings for 12 months, transmitting long-term confidence	High
Performance Support	Net profit increased by 90% year-on-year in the first three quarters, with strong fundamentals	High
Industry Prosperity	AI computing power demand continues to surge, and the optical module track maintains high growth	Medium-High

Although the share reduction itself does not constitute a major negative factor, investors still need to pay attention to the following risk factors:

• Valuation Risk
  : The current PE is
  80.18 times
  , which is in the historical high range [0], and the market may have fully reflected optimistic expectations
• Market Volatility Risk
  : The actual floating share capital increases after the completion of the share reduction, which may increase stock price volatility
• Industry Cycle Risk
  : If the capital expenditure of North American cloud vendors falls short of expectations, it may affect the company’s performance growth rate

For different types of investors, it is recommended to adopt differentiated response strategies:

:

• This share reduction can be regarded as an expression of the attitude that
  “the major shareholder realizes partial profit realization at a high level but remains optimistic about the long term”
• Can combine the company’s performance growth rate and industry prosperity to accumulate positions on dips

:

• Pay attention to the stock price performance during the 12-month lock-up commitment period (until January 2027)
• Can set valuation-based stop-profit/stop-loss lines to control portfolio volatility risks

:

• Wait for the market to fully digest the impact of the share reduction before evaluating the entry timing
• Focus on the shipment volume and gross profit margin changes of 800G/1.6T optical modules in 2026

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The share reduction operation by Zhongji Innolight’s controlling shareholder is a capital operation that

:

1. From the Share Reducer’s Perspective
   : It locked in gains of approximately RMB 2.87 billion at a historical high, and at the same time maintained the company’s market value stability through the lock-up commitment, reflecting the responsible behavior of a major shareholder

2. From the Company’s Perspective
   : Strong fundamentals, impressive performance growth rate, and sustained high industry prosperity provide solid support for the stock price

3. From the Market’s Perspective
   : The share reduction ratio is small (only 0.49%), and the lock-up commitment eliminates concerns about continuous share reduction, so the negative impact on the stock price is limited

Overall, this event can be interpreted by investors as a signal of

. It is recommended that investors combine their own risk preferences and make investment decisions after fully evaluating the valuation level.

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[1] Securities Times Network - “Zhongji Innolight’s Controlling Shareholder Zhongji Holding Plans to Reduce Holdings by No More Than 0.49% of Shares via Block Trading” (https://www.stcn.com/article/detail/3360643.html)

[2] Dazhong Daily - “Earning RMB 7.1 Billion! Zhongji Innolight’s Net Profit Increased by 90% in the First Three Quarters, and Single-Quarter Growth Rate Doubled” (https://dzrb.dzng.com/general/0/NEWS2856587NFZFYVCPOCDYK)

[3] ICCSZ - “Zhongji Innolight’s First Half of 2025 Operating Revenue Reached RMB 14.789 Billion, Net Profit RMB 3.995 Billion” (http://www.iccsz.com/4g/news.Asp?ID=c7657dec65794ee3b49ced7995b49ace)

[4] 21st Century Business Herald - “Surge in Computing Power Drives Optical Modules, RMB 500 Billion Zhongji Innolight Hits a New High Again” (https://m.21jingji.com/article/20251025/4804270d54210c34f2361b49b52bf539.html)